Solar electric...what's up with that?

[Mike Henderson]

Mike, you illustrated what I meant. The example you cited of land and a 401K have intrinsic value for an infinite period. Machinery, cars, and solar panels don't. One way to look at it is you are prepaying the electric bill until the system breaks even, then you are in the profit. Using a quick google of some government site http://www.eia.gov/tools/faqs/faq.cfm?id=97&t=3

my state uses an average of 1029 kWk/month, costing $95. This puts breakeven on a 900 kWh/month system at 17.54 years as calculated on cost. If it runs for another 2.5 years (20 year life) you make $2,850, or if it goes to 30 years, you make $14,250, assuming no breakdowns.

Now, if you had invested $20,000 at 3% for 20 years, you would get back $33,090, 30 years gets you $42,570. For my simple mind, investing in this scenario nets you $10,240 more, or for a 30 year, $8,320 more.

At some point, it looks like the solar panels beat the return of the investment, but it would be in year 70 or so I think. Another thought, sure the panels may last 30 years, but what if technology changes between now and then, and in year 15 the "new improved panel" comes out and you want to replace yours. Then you've lost money for the first 15 years.

Perhaps electricity is a lot less expensive in your area than it is in mine - I can assure you that the breakeven in California for a 1029KWh/month is not 17.5 years. With the cost of electricity in my area, I believe I'll have 20 years of free electricity from the system I installed. And when I said I expect to pay it off in present value terms in 10 years, that takes into account the cost of money (which is pretty cheap right now). Present value is what stream of money, discounted at the present cost of money, will equal your investment.

While better panels may come out in the future, it will not obsolete my panels. If I decide to replace what I have, it would have to be because I could make more money with the new panels than I could leaving what I have in place. So if I "scrap" my panels, it will be because I can make more money with new panels. But people have been trying to improve the efficiency of solar panels for a long time and the advances have been pretty small - and increase the cost of the panel. I'll welcome a breakthrough but I won't hold my breath waiting for it.

Solar panels beat the investment (for my installation) in about 10 years. Solar panels for people who use a lot more electricity beat the investment (in California) in a lot less than 10 years, not 70 years. For your area, with your cost of electricity, it may be 70 years. If so, be thankful you have cheap electricity. Only a good financial analysis could answer that question.

Mike

[I'm not trying to convince anyone to buy a solar-electric system. I'm only telling people what I did and why.]